Mr. Roger Williams (Brecon and Radnorshire) (LD):
Home owners who suffer flood damage often fear that they will not be able to get insurance cover or that, if they do, it will be at a greatly increased cost. Will the Secretary of State assure me that he will talk with the Association of British Insurers as soon as possible, to give its members the comfort that there will be an 26 Jun 2007 : Column 178
increase in flood protection works, so that they can maintain cover at a reasonable cost?

David Miliband:
The whole Government are committed to our partnership with the ABI and the insurance industry. It is obviously in the public interest, in the interest of public expenditure and the interest of home owners. I cannot say often enough that we are determined to continue that partnership and to fulfil our side of the bargain.

Mr. Brian Jenkins (Tamworth) (Lab):
Speaking from elsewhere, I want to draw my right hon. Friends attention to the flooding that occurred in Fazeley and Elford in my constituency and place on the record my thanks to all the public service employees who worked tirelessly round the clock and who had to make decisions such as to let cattle and stock drown, so that people could be saved. That loss of cattle and stock may not be claimable on insurance, because it may be considered the result of an act of God.

I shall not apportion blame until after the inquiry is completed. My difficulty is that, although the Bellwin formula will fund 85 per cent. of the cost, the disproportionate cost that falls on small authorities, such as Lichfield district council, will be heavy. Will my right hon. Friend use his good offices to speak to his colleagues in the Government to see whether the next grant settlement could take into account to some degree the cost of the flooding? The last thing that I want people who have gone through this nightmare to face is an increase in council tax bill next year.

David Miliband:
I share my hon. Friends good wishes for his constituents and his desire to place on record both his sorrow for what they have been through and his thanks to the public services in his area. I am happy to find out what point my right hon. Friend the Secretary of State for Communities and Local Government has reached in the local government grant settlement process, but I am glad that my hon. Friend agrees that the Bellwin scheme provides the foundation for an appropriate response.

Mr. Laurence Robertson (Tewkesbury) (Con):
The Secretary of State will be aware that two rivers, the Severn and the Avon, meet at Tewkesbury and continue the length of my constituency as the River Severn. It is a great attraction, but the downside is that it makes flooding much worse. However, the situation has been exacerbated by far too much building not only on the floodplain, but close to it. Does he therefore share my alarm at the proposals in the regional spatial strategy to build thousands of extra houses in such areas? When those proposals land on his desk, will he look at them very seriously and very carefully?

David Miliband:
We look at all proposals very carefully, although technically such proposals do not land on my desk; they land on the desk of my right hon. Friend the Secretary of State for Communities and Local Government. However, I assure the hon. Gentleman that the sustainability criteria are to the forefront of the regional spatial strategies and we shall be keenindeed, determinedto ensure that flood risk is properly taken into account when planning new housing numbers.

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Mr. Philip Dunne (Ludlow) (Con):
The Secretary of State is clearly aware that Shropshire is one of the areas worst affected by the storms, but he may not be aware that Ludlow has suffered unprecedented flooding, including the sweeping away of one of the bridges and a main access road into the town. He may also not be aware that the Severn valley railwayan historic railway that provides a great tourism and economic boost to the areahas suffered more than £1 million worth of damage to its railway track. Given what he said about the Bellwin formula, will he assure the House that sufficient funding will be available to match the applications from local authorities? Is anything available for bodies that are not local authorities that have suffered major infrastructure damage? If I may, Mr. Speaker, I should like to put my question in the context of the National Audit Office comment that of the £125 million available this year for new or improved flood defences, a mere £15 million is available for urgent works. Will that really be enough under Bellwin?

David Miliband:
I am grateful to the hon. Gentleman for filling me on the situation in Ludlow, of which I was not aware in such detail. I think that I am correct in saying that the Bellwin scheme is a demand-led scheme, not a capped scheme. That should provide some degree of comfort, although every case has to be examined individually. I or my hon. Friend the Minister for Climate Change and the Environment will write to the hon. Gentleman, but my understanding is that the Bellwin scheme is restricted to local authorities.

Mr. Philip Hollobone (Kettering) (Con):
Recent serious flooding in Kettering has led local people to point to the issue of blocked drains, and to the massive increase in the number of new houses being built. It is up to the county council to make sure that the drains are cleared, but will the Secretary of State ensure that in growth areas, where very large numbers of houses are set to be built in the next 15 years, the Environment Agency has the resources that it needs to monitor all the planning applications that come forward?

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David Miliband:
Certainly, we are determined to ensure, in growth areas and elsewhere, that we future-proof the provision that is made, as the hon. Gentleman suggests.

Bills presented

Criminal Justice and Immigration

Mr. David Hanson, supported by the Prime Minister, Mr. Chancellor of the Exchequer, Mr. Secretary Darling, Secretary John Reid, Ms Secretary Hewitt and Mr. Secretary Hain, presented a Bill to make further provision about criminal justice (including provision about the police) and dealing with offenders and defaulters; to provide for the establishment and functions of Her Majestys Commissioner for Offender Management and Prisons and to make further provision about the management of offenders; to amend the criminal law; to make further provision for combating crime and disorder; to make provision about the mutual recognition of financial penalties; to make provision for a new immigration status in certain cases involving criminality; and for connected purposes: And the same was read the First time; and ordered to be read a Second time tomorrow, and to be printed. Explanatory notes to be printed [Bill 130].

Citizens Convention

Julia Goldsworthy, supported by Mr. Douglas Carswell and Mr. David Chaytor, presented a Bill to establish a Citizens Convention to facilitate the involvement of people from all sections of society in considering the way in which the United Kingdom is governed; to make provision relating to the implementation of recommendations made by the Convention; and for connected purposes: And the same was read the First time; and ordered to be read a Second time on Friday 29 June, and to be printed [Bill 136].

26 Jun 2007 : Column 181

Energy Markets (Carbon Reduction and Warm Homes)

4.26 pm

Alan Simpson (Nottingham, South) (Lab):
I beg to move,

That leave be given to bring in a Bill to promote sustainable energy and energy efficiency; to make further provision in respect of the regulation of the gas and electricity industries; to provide Ofgem with new environmental and social duties; to make further provision about the role of local authorities in meeting the United Kingdoms carbon reduction and fuel poverty targets; and for connected purposes.

This debate takes place at an auspicious moment in Parliaments history. It is the end of one era and the beginning of another. What connects the two eras are the serious challenges of fuel poverty and addressing climate change that will be inherited by the new Prime Minister and the framework of governance that he will bring with him. The truth is that we sit within a policy framework that is not fit for purpose, in terms of our ability to meet the targets that we have set ourselves.

Let me give the House some of the benchmark figures that lead me to say that. First, last week I received a reply from the Minister for Housing and Planning, confirming that there are 2.2 million households in abjectly fuel-poor properties that have a standard assessment procedure ratingan energy efficiency ratingof less than 30. Department of Trade and Industry figures confirm that if there is a steady increase in energy prices, as is predicted, by 2016the date by which we are legally supposed to have completely eradicated fuel poverty in the UKthere will be more than 3 million fuel-poor households in our country. We also know from the papers that have been produced in support of the Climate Change Bill that on current projections we will not meet our 2020 climate change commitments.

We need a new frameworka step-change frameworkthat will allow us to address those points, and I have tried to incorporate such a framework in the Bill. It seeks to address four issues. First, it would give towns and cities a duty to produce their own sustainable energy plans that would meet or exceed the national targets. Secondly, it seeks to reform the role of Ofgem. Thirdly, it would introduce the concept of citizens allowances, for both electricity and gas, to underpin a shift in the tariff system framework. Those allowances would have to be delivered at the companys lowest tariffs, and we would then move to a system of higher charging for increased energy consumption. Finally, my Bill seeks to give the Secretary of State the power to introduce feed-in tariff systems, which would have preferential payback frameworks that would give an entitlement to the citizens who provided that feed-in energy. I shall go through those four aims one by one.

We know that by 2016 the Government hope to provide five new eco-towns that are carbon-neutral in their built design. By that time, however, Germany will have 40 to 60 eco-cities, made up of existing properties in which people are living now. That is the challenge for the UK, too. The building of 200,000 new houses a year is important, but the test is what we are going to do with the 25 million properties in which people are living today and in which, in all probability, they will 26 Jun 2007 : Column 182
live the majority of their lives. There is therefore a big step change from 200,000 properties a year to the 25 million with which we will have to deal in 10 years. If we are to get there, we must provide a different rules base for our energy system, which is why we must change Ofgems framework or terms of reference.

I have spent the past four or five years going round all the major energy companies, asking them what plans they have over the next five years to sell less energy for consumption. Not a single company in the land has any plans to do so. When I ask why, they say that Ofgem requires them to enter into least price competition for the sale of energy, so they are locked into short-term contracts that are suicidal in the race towards a precipice of increased energy consumption that will accelerate the problems of climate change. That must be changed by giving Ofgem a different remit so that it has a duty, first, to promote reduced energy consumption and, secondly, to promote the development of an energy market for the sale of energy services, rather than the sale of energy consumption. It would be helpful, too, if we removed some of the constraints or confines within which energy companies are required to work.

For energy companies themselves, part of the dilemma is the fact that they are locked into the 28-day rule. They are required by the Government to spend about £560 million a year as part of their energy efficiency contribution to alleviate fuel poverty and achieve carbon reduction targets, but they do not know how to do so within 28-day contracts. They want to get out of that lock. I suspect that citizens would say pretty much what every hon. Member would say when asked whether they would sign up to a 10-year contract with an energy supply company: Theres not a cat in hells chance, because before the ink is dry, the company will double or treble the prices, so we would be hooked into a punitively priced contract for 10 years. We must therefore move to energy services companies that are community owned or municipally owned, just as they are in large parts of Europe. By allowing those 10-year contracts between people and energy companies we can secure long-term partnership contracts that will allow the companies to spend their e-contributions in a much more productive and sustainable way.

The most important aspect of the Bill is the Secretary of States powers to introduce feed-in tariffs. A couple of weeks ago, I brought Hermann Scheer to Parliament. In Germany, he is recognised as the father of feed-in tariff legislation. He is a German parliamentarian, and he was responsible for piloting a measure through the German Parliament in 2000. The German Secretary of State is empowered to set tariffs that can be put in place for 20 years and, for the same period, citizens are paid up to four times the market price for clean energy that they put back into the system. That has driven the transformation of the German energy sector, so that in the last year alone it delivered 97 million tonnes of carbon savings, which is 10 times what the UK aspires to but fails to deliver. That has delivered jobs and the lead in the incorporation of renewable technologies, and it has made a radical impact on the concentration of fuel poverty in Germany. That is the core of what I hope the Bill would deliver.

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The key features of the Bill are that it would move us into a different conceptual framework for what the next energy era will look like. The Bill is both visionary and practical. It is deliverable and economically viable. It is urgent, possibly more so than anything else in my lifetime. It creates jobs, as the Germans have doneabout 240,000 jobs. It takes people out of fuel poverty and cuts carbon emissions like no other single measure has been able to do. It delivers a sense of community ownership of both the climate change agenda and the determination to eradicate fuel poverty.

It was Victor Hugo who said that there was nothing more powerful than an idea whose time had come. I believe that the combination of the four elements in the Bill encapsulates that idea, and I hope the House will determine that its time has come too.

Energy Markets (Carbon Reduction and Warm Homes)

Alan Simpson accordingly presented a Bill to promote sustainable energy and energy efficiency; to make further provision in respect of the regulation of the gas and electricity industries; to provide Ofgem with new environmental and social duties; to make further provision about the role of local authorities in meeting the United Kingdoms carbon reduction and fuel poverty targets; and for connected purposes: And the same was read the First time; and ordered to be read a Second time on 19 October, and to be printed [Bill 131].

26 Jun 2007 : Column 184

Orders of the Day

Finance Bill

As amended in the Committee and in the Public Bill Committee, further considered.

Clause 4

rates and rate bands for 2010-11

4.37 pm

I raise the matter again because the issue of inheritance tax seems to be exercising ever greater numbers of people, yet the changes announced on Budget day were passed almost without remark. On the face of it, those changes were good news, which one might expect the Chancellor to want to champion. Clause 4 raises the nil rate threshold to £350,000 from 2010-11another example, perhaps, of the Chancellor trying to keep control of the Treasury long after he leaves it. The Red Book does not tell us what the cost will be to the Exchequer, because we have information only up to 2009-10. The increase comes after several years of successive increases in threshold, which is to be welcomed.

I raise the issue in order to highlight the contrast between the increase in threshold and the rise in house prices. In 2005-06 inheritance tax raised £3.3 billion in revenue to the Treasury, and this year that is set to increase to £4 billion. Let us compare that to the rise in house prices. Between 1995-96 and now, house prices have increased by 199 per cent., according to the Halifax. Over a similar time scale, the inheritance tax threshold has risen by only 95 per cent. It is clear that the number of estates caught by inheritance tax will have increased over that period. In 1996, 15,000 estates paid inheritance tax. In 2006, that figure had increased to 37,000. Will the Minister acknowledge that the nature of inheritance tax and the objective that it is intended to achieve are changing?

Inheritance tax is changing from a charge on the very wealthy to a charge on those who consider themselves to be on middle income, who have benefited from rapidly rising house prices. It recalls to mind an example that came to my attention in my surgery involving a couple who had lived in Cornwall all their life. They were living in two adjoining residences, one of which belonged to their parents. They failed to understand that they could use the allowances of both parents, and they did not realise until the point at which both parents had died. The total value involved was such that they had to move out of the property where they had lived all their married lives, and where their parents had lived all their married lives, in order to pay the inheritance tax bill. If they had used both parents allowances, they would not have needed to do that. There are people who are being caught because they do not understand the system. They do not necessarily have very large incomes or live in particularly valuable properties.

Mrs. Theresa Villiers (Chipping Barnet) (Con):
The hon. Lady is clearly concerned about thresholds, but I am slightly puzzled about why she is seeking to delete a clause that increases the threshold.

26 Jun 2007 : Column 185

Julia Goldsworthy:
The amendment is intended to allow an opportunity for debate on the Floor of the Housea debate that we have not yet had. I have no intention of pressing it to a vote; I wanted to use it as an opportunity to highlight how the nature of the tax is changing, and how what we see in the Bill is very different from the reality of many peoples experiences.

We need to look at the make-up of estates that are paying inheritance tax. Despite property price increases since 1998, the number of estates paying inheritance tax worth more than £2 million has fallen by 8 per cent. In the meantime, among estates worth £300,000 to £500,000, the number has risen by 20 per cent. We are therefore seeing a reduction in the number of estates at the very top end that are paying inheritance tax, while the number at a much lower level paying the tax is increasing disproportionately.

I appreciate that the Government are making efforts to redress that imbalance, as we saw from the changes made last year to the inheritance tax treatment of trusts. There are many arguments to be had about whether the policy was retrospective and its impact on decisions made a long while ago, but there was clearly a feeling that people on much higher incomes were finding a way of getting out of the system and avoiding paying inheritance tax. How many more estates does the Chief Secretary estimate will be caught as a result of those changes?

I raised the key issue during discussion of last years Finance Bill. It is where the true inequality liesa question that relates to lifetime gifts. People who have the benefit of easily disposable or liquid assets can make use of the current seven-year rule that applies to lifetime gifts, but people in the circumstances that I described earlier, whose only significant asset may be tied up in their estate because it is their property, cannot do so in the same way. Of course, I am not suggesting that we get rid of the rule on lifetime gifts, but I wonder whether the Chief Secretary is prepared to look again at the matter. Demographics have changed since the rule was introduced. My understanding was that the seven-year rule was introduced to give parents the opportunity to help their children to make their property purchase and get a foot on the property ladder, but the demographics have changed; peoples life-expectancy is changing, for example, and as a result, people are living longer than might have been expected when the limit was introduced.

The Chief Secretary to the Treasury (Mr. Stephen Timms):
Will the hon. Lady say a little more about what change she is proposing to the seven-year rule? Is she suggesting that people should be looking at a whole lifetime? Is that the point, or is she proposing a level somewhere between seven years and a lifetime?